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September 1, 2015

FICO Data: Warning Signs for New UK Credit Card Performance Mar Positive Trends

September 1, 2015

LONDON — September 1, 2015

Highlights:

  • 14 percent increase since December in new credit card accounts that are 2 cycles delinquent
  • Mature credit cards reached two-year high in on-time payments
  • £49 increase in current balance on mature accounts vs. June 2014
  • FICO data covers millions of UK credit cards

New data from FICO (NYSE:FICO), the analytic software company, shows continued improvement in the health of mature UK credit card accounts, along with worrying signs for newer accounts. 

In June, the percentage of current (non-delinquent) accounts that have been on the books for 12 or more months reached its highest value over the last two years. In addition, the average current balance among mature accounts was £49 higher than in June 2014, and £106 higher than in June 2013.

"This positive result is reflected in the delinquency measures for mature accounts," said Stacey West, a Fair Isaac® Advisors business consultant who works with UK card issuers. "Average balances that were one or more cycles delinquent reached their lowest point in two years."

However, there were also warning signs for new accounts, those that are less than a year old. The percentage of new accounts that are two cycles delinquent has risen 14 percent since December 2014, and average delinquent balances have risen 7.5 percent year on year. In addition, the average amount overlimit for new accounts reached its highest point in more than two years — this figure has been rising since January 2015. The percentage of new accounts that are overlimit is also increasing.

"The market is seeing a lot of activity to recruit new accounts, with the focus on balance transfer offers only now starting to shift to purchase-led offers," West said. Card issuers should carry out further analysis on the newly booked population to pre-empt future delinquencies.

West recommended issuers take three steps related to new accounts:

  • Review application processes and scorecards to make sure they have been aligned with more recent growth objectives, especially if the change in product focus attracts a different account profile.
  • Review the initial credit limits to make sure that the level of unused exposure does not increase and negatively impact the Basel Capital Requirements, and to avoid higher future losses.
  • Review management of current, overlimit accounts to determine whether special treatment is required on this vintage, as well as checking collections processes to ascertain whether to focus on new accounts at specific cycles. "There may be warning signs that can be translated into pre-collections activity," West said.

Current UK Classic Credit Card Industry Averages
Source: FICO® Benchmark Reporting Service

FICO's Benchmarking Services
The card performance figures are part of the data shared with subscribers of the FICO® Benchmark Reporting Service, which compares overall market performance in the UK cards market with individual card issuers' performance. The data sample comes from client reports generated by the FICO® TRIAD® Customer Manager solution in use by most UK card issuers.

FICO has recently released its new Risk Benchmarking Service which forms part of the P&L Insight Suite offerings. This service includes an expanded list of measures that gives card issuers a better view of their industry position in order to guide strategic changes. It also includes an interactive dashboard and the ability to compare portfolios. For more information on the new service, please contact Stacey West at staceywest@fico.com

About FICO
FICO (NYSE: FICO) is a leading analytics software company, helping businesses in 90+ countries make better decisions that drive higher levels of growth, profitability and customer satisfaction. The company’s groundbreaking use of Big Data and mathematical algorithms to predict consumer behavior has transformed entire industries. FICO provides analytics software and tools used across multiple industries to manage risk, fight fraud, build more profitable customer relationships, optimize operations and meet strict government regulations. Many of our products reach industry-wide adoption. These include the FICO® Score, the standard measure of consumer credit risk in the United States. FICO solutions leverage open-source standards and cloud computing to maximize flexibility, speed deployment and reduce costs. The company also helps millions of people manage their personal credit health.

For FICO news and media resources, visit www.fico.com/news.

FICO, TRIAD and Fair Isaac are trademarks or registered trademarks of Fair Isaac Corporation in the United States and in other countries.

Newsroom Contacts

Greg Jawski
Americas

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Darcy Sullivan
Europe, Middle East & Africa

dsullivan@fico.com
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Saxon Shirley
Asia Pacific

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Marisa Arribas
Latin America

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Milla Delfino
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